Degen DeFi time should be now
Good morning/evening
Well it is that sort of near the bottom of the crypto bear market IMO and this would normally be the time where I would be thinking about getting my degen on and use DeFi to borrow some stablecoins to buy some more Bitcoin. It is like a small leverage play, I used Aave in the past to do this, but I would not go mad here and would always make sure I had a large enough of a buffer to cover the volatility. I borrow when the price is low, buy Bitcoin and pay back the loan when the price goes up, take some profit and have more Bitcoin, sounds simple and it also sounds easy, but there is risk, there is always risk. I did the same on Kamino with SOL , using tried and tested DeFi protocols, with large TVL, in my mind reduced some of the risk but that risk seems higher now than it did last cycle, just down to all the hacks or exploits there have been in DeFi or bridges or DAO's.
Even if an exploit is not directly on a protocol, there can be fallout, yes Aave was affected by the Kelp DAO exploit even though their smart contracts were not compromised, the attacker did use it to cash out which caused a huge bad debt and ETH was locked on the protocol for a while. That also caused TVL to plummet, I had taken all of my assets off of Aave and into cold storage just before due to having a gut feeling, but I have written about that before.
Allbridge had to pause its core bridge after a one million dollar plus flash loan on Kamino was used to manipulate the Liquidity pool ratios, the huge volume and quick trades between stablecoins broke the pools internal pricing equations which miscalculated the value of the assets, so the attacker could withdraw at a highly inflated rate, paid back the flash loan and walked away with a huge profit.
Wanchain Cardano bridge exploited for 13 million (never actually heard of this one)
515 million night tokens drained, valued at 13 million pre exploit.
Early suggestions are a flaw in the treasury check validator allowing signature reuse attacks. The bridge is offline. Token value plunged over 30%
layer zero executor wallets breach affects optimism network
The security breach resulted in a 2.4 million drain.
Arbitrum protocol Ostium lost 18 - 23.7 million drain due to a compromised oracle signer key
Bonk dao 20 million of Sol
malicious proposal of the dao, blah, blah, blah.
This list could actually include over 20 or more exploits or hacks that have occured since I started writing this a few weeks ago, yes weeks not months! It is getting silly now.
Date Protocol Approx. loss What happened
Sept 6 Liquid Network ~$320m initially Attackers exploited a flaw in the Liquid/SideSwap peg out process and withdrew around 4,000 BTC
Aug 30 Tectonic ~$75m Attacker borrowed roughly $75m from the Cronos lending protocol using manipulated collateral/pricing
Aug 31 More Markets ~$9.3m Lending reserve on Flow EVM was drained through an exploit
Aug 23 Term Labs ~$8.5m Governance attack allowed an attacker to take control of vaults and drain funds
Aug 28–29 Ajna ~$775k Exploit affected several ETH pools
Aug 18–19 Maya Protocol ~$1.7m Six separate bugs were chained together in a sophisticated cross chain attack
So with all this going on it has made me more wary than ever and I have a lot of work to do on the crypto front, I have started uninstalling wallets I don't use, although trying to cash out some Sats from Speed wallet is proving to be very difficult, I could just uninstall and be done with it, but they are MY Sats at the end of the day. I have some revoking to do and some decisions to make on the DeFi front.
I have had a Tangem wallet with cards and a ring that I have never used and should probably have another look at, even if it is just to not have most of my holdings on a single Ledger device.
This is one of those things I think we sometimes forget about in crypto. We spend so much time worrying about whether Bitcoin is going up or down, whether the next bull run has started or whether we have bought the right Altcoin, that we can forget about the actual security of what we already own.
I have always been a big believer in self custody, but self custody also means taking responsibility for what you are doing. Having a Ledger does not magically make you safe. Having a Tangem does not magically make you safe either. Connecting your wallet to random DeFi protocols, approving token allowances you have forgotten about and signing transactions you don't fully understand can all create problems.
And then there is the other side of DeFi. Even if I do everything correctly, I am still trusting somebody else's code, or an oracle, or a bridge, or a governance system, or some combination of all of them.
That is probably the bit that is making me think twice about getting my degen on this time around. For me, the first step is probably a good old crypto spring clean. Remove the wallets I don't need, revoke the approvals I don't remember giving, move funds that don't need to be sitting in hot wallets and have another look at what I actually have connected to what and then have a good think about how much risk or extra risk, I am prepared to take.
Well as always thank you for reading and please feel free to share your thoughts, do you think DeFi is more risky than normal? Are you being more cautious now? Or am I being overly paranoid lol?
